Putting the new feature where it belongs (or, testing the limits of airline loyalty)

It’s no secret that I’m fascinated by air travel and its economics. So when our entire company convened in Budapest for a work meet-up a few months ago, I made the most of an opportunity to compare anecdotes and on-board amenities across a range of different transatlantic carriers.

If I’m flying for longer than a couple of hours, these days I’ll go out of my way to pick a carrier that has laptop power available in all seats (wifi is an added bonus). Flights are immeasurably more productive if I can work, and most work seems to involve the laptop. It seems reasonable to expect that more and more people will also feel this way. In-seat power will be valued higher, and employers will appreciate the added productivity of their laptop-toting employees. Doubtless providing power to our personal screens will be something that on-demand media services could see some value in too.

I was interested to hear from one colleague that on Lufthansa’s new A380s, economy class passengers may connect to a wifi signal, but don’t have access to any power. That just seems silly. I have to imagine that in the overall costs associated with buying and equipping a new A380, adding power at every seat must be an almost inconsequential expense.

Airlines have a clever business model of engendering permanent passenger envy. Unless you’re flying in your own private jet, you can be certain that somebody else is always more comfortable than you, and airlines like to make sure that you know it. The entire economics of customer loyalty are geared around indulging people’s aspirations to be more comfortable in the aluminium can.

I’ll hold my hand up to being a total sucker for it. I almost exclusively fly Virgin Atlantic if I’m going from a US city to London. In return, Virgin lets me use their lounges and (according to no clear algorithm that I can discern) randomly upgrades my seat every now and again. From my flights and the use of a Virgin Atlantic credit card, I have enough miles to upgrade my return journeys (the day flights) to Premium Economy, affording me more leg room (nice) and laptop power (essential) on my 11 hour flight. I’m sure that there are plenty of people who pay for these things too — and if not individuals, there are certainly companies that will pay for it.

On the one hand, this looks like some excellent customer segmentation at work: I value using my laptop on a flight so much that I’m willing to spend in order to be able to fly with power for my electronics. By putting power only in the cabin one above the level that I can afford, an airline arouses my envy and causes me to do everything I can to be able to fly in this cabin, including giving them my exclusive business. I’m pretty sure that this is the reason why there’s no power in the back of Lufthansa’s A380; companies are only cutting costs these days, and if Jones from accounting has all the tools he needs in Economy, why on earth would the company pay for something more?

But I’m reminded of something that I heard from Kenny van Zant (twice): Product Managers can be inclined to add new product features to the pricing level *above* the one in which the majority of customers value it, the theory being that that will help move more customers up to a higher price point. But Kenny’s view is that in a competitive market, if you overcharge your customers, someone else will come along and charge the customer something closer to her valuation of that feature. In the process, they’ll win her business.

I’m really not all that averse to economy seats on planes. If I can get an exit row, and the person in front doesn’t do the (ultimate douchebag) maneuver of reclining his seat into my dinner, I can be pretty content. In Kenny’s example, I’m a low value customer that would like at-seat power. Would I switch airlines for it? Absolutely. And I think that others will too. Virgin America’s brand new fleet is equipped throughout with at-seat power: I’m certain that they recognized that a San Francisco-based domestic airline would win loyal customers very quickly by providing what is fast becoming a necessity for airline travel.